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HMRC internal manual

Employment Income Manual

Particular benefits: computers: partial exemption: exclusion of arrangements which favour directors over other employees: years up to and including 2005/06 only

Section 320 ITEPA 2003

The computer exemption is abolished for 2006/07 onwards. For the tax treatment of a computer provided for private use from 6 April 2006 onwards see EIM21699.

Years up to and including 2005/06

There were two sets of circumstances when the exemption in EIM21700 did not apply:

  • the first was where the only arrangements for making computers available were arrangements which were confined to cases of provision to directors or members of their families, and
  • the second was where any provision to directors or their families was on more favourable terms than any provision to employees who were not directors or their families.

Neither test was intended to be particularly restrictive. The overall purposes of the legislation included encouragement of computer provision and reducing the regulatory burden on employers. The tests should be seen as a backstop to deny relief where a company introduced arrangements that deliberately advantaged the directors over other employees. Note that it was not necessary:

  • that the employees and directors were provided with identical computer equipment, or
  • that all the employees and directors got equipment of equal value, or
  • that all employees were provided with computer equipment, so long as some employees who were not directors were provided with computers and the terms on which they were provided were not less favourable than the provision to directors.

Most larger employers formally set out the terms on which equipment was supplied, either in a memorandum to the employees and directors concerned or in a staff handbook or other document which contained terms and conditions of employment. However many smaller employers may not record in writing what was expected of the employee. In such cases the terms of provision may have to be inferred from all the surrounding facts. For instance exemption was not due if:

  • directors got computers free but non-director employees made a contribution, or
  • directors’ families were allowed to use the computer equipment but the families of non- director employees were not, or
  • employees only got computers on condition that they “worked at home” but no similar restriction was placed on directors.

Note that in the case of “one-man” companies, or other companies that have directors but no non-director employees, there was no group of employees with which to compare the provision to directors. So for such companies exemption could not be denied.